Most reputable growth stocks end up doing their job of dishing out sizable gains. That's not to say, however, any of these names are immune to the occasional setback. Indeed, their very growth-oriented nature usually means they take sizable lumps when they're tripped up.
These stumbles, however, are great buying opportunities for investors that can keep their eyes on the bigger picture. To this end, if you've got a couple of thousand bucks sitting idle right now, here's a closer look at two great growth picks to consider while they're down. Both companies face compelling long-term futures ahead.
Shopify
It's entirely possible you've used a Shopify (SHOP 1.11%) service without even realizing it. Bunches of familiar brand names, including Kraft Heinz, Dressbarn, and Staples are just some of its major customers. Then there are the millions of other, smaller shops that have tapped the company for help with building an e-commerce presence.
All told, Shopify facilitated $175 billion worth of online sales last year, up 47% from 2020's levels. Analysts are modeling top-line growth of 31% this year, and another 33% next year, pushing the company deeper into the black. This growth, however, only scratches the surface of Shopify's potential.
Image source: Getty Images.
The driving force behind this ongoing expansion is as much about Amazon as it is Shopify. While Amazon.com is the undisputed king of e-commerce, it's showing all the pitfalls of sheer size. Its scale has become unwieldy, it offers a little too much direct competition with third-party sellers, and it is increasingly difficult for sellers looking to operate a unique store to do so in a shopping environment that's home to around 2 million other active sellers.
Weary of the platform's inherent challenges, more and more brands are looking to reclaim control of how they connect with consumers online by handling these transactions all by themselves.
The thing is, although millions of small and not-so-small businesses have embraced Shopify's platform, so many more have yet to make the switch -- or even enter the e-commerce fray at all. While Shopify assisted with $175 billion in online sales last year, Digital Commerce 360 reports U.S. consumers alone spent nearly $900 billion online in 2021, and that amount is less than 20% of the $4.5 trillion worth of retail sales they racked up during that 12-month stretch. eMarketer pegs the global annual e-commerce figure at right around $5 trillion.
The point is, there's a lot of opportunity left for Shopify to tap into from here. The stock's 66% slide from November's high says investors aren't really connecting the dots.
Crocs
The other high-growth name to scoop up while it's beaten down is Crocs (CROX 1.53%). Shares of this company are down 60% from November's peak and are knocking on the door of new 52-week lows reached in March.
Yes, this is the same company behind the funky foam shoes that were all the rage back in 2007 and then seemingly went away by 2009. The shoes, it seems, fell out of fashion as quickly as they about as quickly as the fad developed.
The thing is, Crocs never really went away. The brand simply needed to regroup and assess how to create demand that's sustainable and growable. It appears to have done exactly that. With the exception of the first two quarters of the COVID-19 pandemic in the United States, revenue has grown every quarter since 2017. Last year's top line of $2.3 billion, in fact, was a record breaker despite all the supply-chain hassles the world was facing then.
The key to this sustained success is threefold. One of these folds is the world's fresh appreciation for functionality over fashion. Crocs shoes are as unconventional looking as ever. But consumers don't care. They're ultra-comfortable, so much so that people don't mind being seen wearing them wherever they go.
Another new pillar of Crocs' surprisingly sustained success is the fairly new understanding that its footwear allows brands to make statements about fashion by poking a little fun at the fashion industry itself. Companies ranging from Hidden Valley salad dressing to luxury fashion name Balenciaga have collaborated with Crocs to create and sell new products, as have pop stars Justin Bieber and Drew Barrymore, along with rock band Kiss. Consumers loved the unlikely mash-ups.
Finally, Crocs' third strategy to drive continued sales growth is recognition that a bunch of its customers love customizing their clogs with charms, patches, and other decorations. The company even promotes its Jibbitz brand of shoe charms at its e-commerce site for shoppers looking to add a little bling to their online orders for footwear.
The three-pronged plan seems to be working. Despite the stock's steep sell-off, analysts expect nearly 50% revenue growth this year followed by more than 18% growth next year.
The recent pullback has also dragged shares down to a price that's only 7.3 times this year's projected per-share earnings of $9.95. It's not likely the market's going to let this stock linger at such a low valuation for much longer.
